Drug pricing GoM may meet FM to clear standoff

Written by fe Bureau | New Delhi | Updated: Nov 16 2012, 07:28am hrs
To ease an inter-ministerial gridlock over how to price essential drugs in the country, the group of ministers headed by agriculture minister Sharad Pawar is set to meet again by Monday, roughly one-and-a-half months after it concluded the matter.

But this time, it is likely to host a special guest finance minister P Chidambaram, who has raised a series of objections to the market-based pricing formula recommended by the GoM and has instead expressed his preference for continuance of the existing cost-based mechanism for fixation of essential drugs prices.

This urgent meeting of GoM has been convened on the direction of the Prime Ministers Office to build a consensus over the issue, so that this disagreement between finance ministry and the GoM over the best method to regulate drug prices doesnt reach the Cabinet, which is likely to take up the matter next week.

The government is racing against a deadline in this case. The Centre has promised the Supreme Court that it would notify its decision on the national pharma pricing policy by November 25 and would inform the apex court about it in its next hearing scheduled on November 27.

According to sources, the GoM, which has pored over mines of data and consulted over 60 stakeholders during the deliberation process, may try to persuade the finance minister in favour of the market-based pricing model.

The finance ministry, which was not part of the GoM, raised objections when the Cabinet note outlining the proposal was circulated. The ministry also sent its note of objections to the PMO and the Cabinet secretariat.

North Block wants all combination drugs using one or more ingredients and all strengths of essential medicines and bulk drugs included in the price net. This is in addition to its demand to continue with the cost-based formula to fix essential drug prices. In its note, it even underlines the need to consult state governments before taking any final decision, citing health as a state subject.

The drug pricing policy, however flows from Essential Commodities Act, which is a Central legislation.

Meanwhile, this set of objections by finance ministry has rattled the drug industry, which is worried about the consequences.

Some analysts and consumer groups reckon that the GoMs market-based pricing formula of fixing the price by taking the weighted average price of all brands in a segment with more than 1% of market share by volume, is an exceedingly liberal one for the industry, and wouldnt help the consumer much.

The cost-based control, limited to a fifth of the drug market, if extended to all the identified essential drugs in single-API and combination formulations, could hit the industrys profits hard.